In 2003, the French fashion house
Louis Vuitton discovered that, when
French users entered “Louis Vuitton” into Google, they were shown an
advertising link pointing to fake LV
products. While LV could have sued
the product imitator, it decided to sue
Google. From LV’s perspective, Google
was a very attractive target: If Google
was found liable, LV would not need
to sue numerous individual product
imitators. With one lawsuit against
Google, LV could stop all keyword-re-lated trademark violations at a stroke.
Google, on the other hand, has a vital
interest in avoiding being held liable in
such lawsuits. Google’s business model relies extensively on the advertisement auctioning mechanisms underlying the Ad Words system. Of Google’s
$23.6 billion gross revenues in 2009,
about $22.9 billion came from advertising (see http://investor.google.com/
financial/ tables.html). A major part of
this advertising revenue is believed to
come from Google Ad Words.

case studies

Cases such as LV’s have popped up like
mushrooms over the last few years in
many countries. From a trademark
law perspective, they are not easy to
resolve. On the one hand, it seems
unfair that, by choosing third-party
trademarks for keyword registrations
without proper authorization, firms
can benefit from the goodwill of such
marks. It also seems problematic that
Google may benefit, at least indirectly,
from such behavior. On the other hand,
trademark law does not protect trademark owners against each and every
use of their registered marks by others.
Where the Google Ad Words system lies
along this continuum is unclear.

In the French lawsuit of Louis Vuitton vs. Google, a Paris regional court
found Google guilty of infringing LV’s
trademark in February 2005. After
an appeals court in Paris had upheld
this decision, Google appealed to the
Cour de Cassation, which is the highest French court in this area of the
law. The court had to decide whether
or not Google Ad Words was in compliance with French trademark law.
At this point in the story the European
Union kicks in. France has had a com-

prehensive trademark system since
1857. However, in 1989, the European
Union required its member states to
amend their national trademark systems in order to make them compliant with the European Trademark
Directive enacted that year. This directive did not create a unitary Eu-ropewide trademark system. Rather,
it harmonized national trademark
systems across countries.a Today, if
there is some disagreement about
how a particular provision of national trademark law should be interpreted and whether this provision is
affected by the European Trademark
Directive, it is the European Court of
Justice that has the last word. This
was the case with the French LV litigation. As the highest court in France
could not itself decide the case, in
2008, this court referred it to the European Court of Justice, which is located in Luxembourg.

The intellectual property community eagerly awaited the European Court
of Justice’s decision in this case. It
was of particular importance because
courts in various European countries
had reached wildly different conclu-
a As a separate measure, the European Trademark Regulation of 1994 created a European-wide trademark system that is administered
by the European trademark office (officially
named the “Office of Harmonization for the
Internal Market“) in Alicante, Spain. As a result, two trademark systems now exist in Europe: the national trademark systems that are
administered by national trademark offices
and enforced by national courts, and the European trademark system that is administered
by the European trademark office and is also
enforced by national courts.

sions as to whether Google’s AdWords
system violates trademark law. Courts
in France and Belgium, and some
courts in Germany, had ruled that the
AdWords system violates trademark
law or unfair competition law, on the
grounds that Google is using trademarks, confusing consumers, and free-riding on the goodwill of trademark
owners. Courts in the U.K. and other
courts in Germany have ruled the opposite, while decisions in Austria and
the Netherlands have come out somewhere between these opposing viewpoints. Ultimately, in addition to the
French Court de Cassation, the highest
courts in Austria, Germany, the Netherlands, and the U.K. have referred
Ad Words-related lawsuits to the European Court of Justice.

In March 2010, the European Court
of Justice decided the French LV case.b
The court held that a producer of fake
LV products violates trademark law if
his keyword-backed advertising link
creates the impression that his products are actually produced, or at least
authorized by LV. This holding by the
court was not surprising. More surprising was the court’s holding that
the fake product producer would violate trademark law even if he kept his
advertisement so vague that ordinary
consumers would be unable to determine whether or not there was some
affiliation between the producer and
LV. What this means in practice is unclear. While the European Court of Justice settled the relevant points of law,
it did not provide a final answer as to
whether the fake product producer was
actually infringing trademark law. This
depends on whether French consumers were really confused by the advertising link in question. As such matters
of fact are not for the European Court
of Justice to decide, the court referred
the case back to the French courts in
this regard.

The court then turned to the liability of Google itself. The court held that
b This decision covered not only the lawsuit
between LV and Google, but also two other
related lawsuits in France, which will not be
considered here. In addition, as of November
2010, the European Court of Justice has also
ruled on Ad Words-related cases from Austria,
Germany, and the Netherlands. No decision
on the U.K. case (Interflora) had been issued at
the time of writing.